Improving the Equity and Sustainability of the Social Protection System

ZHU Ling

Professor and Deputy Director, Institute of Economics, Chinese Academy of Social Sciences

Abstract:

The segmentation of the social protection system in China renders the system not only inequitable but also inefficient. Those employed in the public sector, particularly civil servants, are “overprotected,” while workers in the non-public sector, especially farmers and rural migrant workers, are “under-protected.” The segmented pension system impedes labor mobility while increasing administrative costs. Policies aimed at developing the new rural cooperative medical system and new rural old-age insurance scheme, as well as policies aimed at encouraging migrant workers to participate in urban social insurance programs, help improve the equity of social protection. However, competition between different local governments to win the “welfare crown” and the heavy burden placed on local finance caused by welfare overspending has been hurting the sustainability of social protection programs. The following measures are suggested to address these problems: First, cease using social insurance coverage as an indicator of work performance for government officials; second, enhance the responsibility of the central government in social expenditure while increasing public transfers to less-developed regions in order to improve social assistance and merit goods provision; third, integrate or reorganize various segments into one entity under each insurance program, with the purpose of eventually eliminating the segmentation problem in China’s social protection system.

Key Words:

social protection, equity, sustainability, poverty reduction

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